'This is the ongoing accumulation of what we have seen over the last two or three years, and the question remains whether countries can balance the books long enough to finance themselves over the medium term,' he said.

'Right now we are back in "risk off" mode, and people are waiting for the next piece of news, and we have to have a view on what individual stocks are worth.'

Looking for mispricing opportunities

Legget is looking for mispricing opportunities on stocks within the same sector to add to those that have fallen harder. 'We don't think the macro news is worse today than it was yesterday, so we will buy the stock that is down 7% rather than the one that is down 2% or flat,' he said.

Examples include top-10 holding Howden Joinery (HWDN.L) and fellow fund holding Taylor Wimpey (TW.L), with Legget noting the latter has been hit harder in the market falls of 23 July. 'Howden has been broadly flat today (23 July) while Taylor Wimpey is down 7% so over two or three weeks we could have a switching opportunity.'

Adding Barclays and Lloyds

Legget took advantage of a decline Barclays' share price amid the stock market volatility on Monday to build his stake in the bank to 3.2%, making it a a top 10 holding. He also added a lesser amount to fellow top 10 holding Lloyds.

'I bought some Barclays today on a valuation that looks abnormally cheap, and seems to be pricing in a tail risk from Europe and the Libor episode. It is a bank that will be around in three or four years and just looks too cheap. As with the other UK banks, all the businesses move in a similar direction but their business mix is slightly different. It is not the bottom up that is driving their price but the macro view on the sector,' he said.

Industrials overweight remains

At the end of June, Legget's long-term overweight to industrials remained, with the sector accounting for almost 42% of the fund.

In the latest bout of weakness Legget has added to top 10 holdings in autos and aircraft manufacturer GKN(GKN.L) and metals heat treatment specialist Bodycote(BOY.L). 'Bodycote has a diverse end market from jets to power stations and a very high market share and economies of scale. It has also been very good at saving costs.'

Backing Weir and Afren

His other top 10 industrials are Weir Group (WEIR.L) and Afren(AFRE.L), which make up 3.1% each of the £405 million fund.

'Afren is a pure exploration and production play. It has been volatile in the past, but we think those concerns are overdone. It is operating in East and West Africa and Kurdistan, and significant new oil and gas discoveries have been made in all three. It is more a drilling story than an oil price one.'

I must sell my Standard fund Legget clearly has not factored in the enormous amount of legal claims from every lawyer representing companies worlwide re LIBOR and the Bank is headless with the guy running the investment bank best friends with Diamond and instrumental in creating current ethos

Markets often over-react to bad news and thereby create investment opportunities. However the bad news hitting Barclays is they were caught cheating. Normally a cheat does not confine his activities to one area and because they now will be more under scrutiny from the regulators and politicians they will be more conservative in their business practices so they will be less profitable. Anyone investing in Barclays has to factor in not only the cost of the LIBOR scandel but also the unknown impact on other business practices.

Regarding banks it is difficult to say that the price is ever too low. Since 2007 the pattern has been bad news followed by more bad news. Who is to say what further malpractice has yet to emerge. Clearly, civil claims will rumble on for years and I expect that American courts will be happy to extract money from UK banks as they are doing with BP . I am a long term bank investor but I am deeply disappointed and see no reason for optimism.